On-the-job search, sticky prices, and persistence

Willem Van Zandweghe

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 3, 437-455

Abstract: Models of the monetary transmission mechanism often generate empirically implausible business fluctuations. This paper analyzes the role of on-the-job search in the propagation of monetary shocks in a sticky price model with labor market search frictions. Such frictions induce long-term employment relationships, such that the real marginal cost is determined by real wages and the cost of an employment relationship. On-the-job search opens up an extra channel of employment growth that dampens the response of these two components. Because real marginal cost rigidity induces small price adjustments, on-the-job search gives rise to a strong propagation of monetary shocks that increases output persistence.

Keywords: On-the-job; search; Cost; of; an; employment; relationship; Sticky; prices; Business; fluctuations (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Working Paper: On-the-job search, sticky prices, and persistence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:3:p:437-455

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